Gold under pressure as resilient consumer spending dampens demand

Gold remained under pressure on Thursday as resilient US consumer spending and a continued rally in oil prices weighed on investor sentiment, offsetting support from softer inflation expectations and ongoing geopolitical tensions.

The precious metal struggled to hold support at $4,000 an ounce, with investors reassessing the outlook for interest rates after the latest US retail sales report indicated that consumer spending, a key driver of economic activity, remained relatively healthy.

US retail sales meet expectations

The US Commerce Department reported on Thursday that retail sales rose 0.2% in June, following May's revised increase of 1.0%.

The reading matched economists' expectations.

The report also showed that retail sales increased 6.7% over the past 12 months, highlighting continued strength in consumer spending despite broader economic uncertainty.

However, details beneath the headline painted a weaker picture.

Core retail sales, which exclude vehicle sales, fell 0.2% in June after May's revised 1.0% increase.

The decline came as spending on core goods weakened, missing economists' expectations for an unchanged reading.

Precious metals extend losses

Spot gold struggled to gain traction following the release of the retail sales figures.

The metal was last trading at $4,001.40 an ounce, down 1.43% on the day, as investors weighed the implications of resilient consumer spending against weaker core demand.

The market's inability to hold above the $4,000 level underscored persistent selling pressure despite softer underlying spending data.

Earlier in the day, gold was already under pressure as oil prices extended gains for a fourth consecutive session.

Spot bullion slipped toward $4,035 an ounce during Asian trading, while August gold futures also moved lower.

Gold had briefly stabilised above $4,050 an ounce earlier in the session.

Earlier on Thursday, silver prices extended their decline for a second consecutive session, with XAG/USD trading around $57.00 per troy ounce during Asian trading hours.

Higher interest rates typically increase the opportunity cost of holding non-yielding assets such as gold, making the metal less attractive to investors.

Geopolitical tensions provide limited support

While escalating geopolitical tensions continued to support defensive demand for gold, that support was offset by the inflationary impact of rising energy prices.

The US expanded its attacks on Iran, targeting coastal defences, missile facilities and additional sites further north.

American forces also disabled a tanker they said was attempting to breach a renewed naval blockade. Iran responded with missile and drone attacks targeting Bahrain, Jordan and Kuwait.

As a result, gold struggled to behave like a traditional safe-haven asset.

While heightened geopolitical risks encouraged defensive positioning, the resulting surge in oil prices lifted inflation expectations and reinforced concerns over higher interest rates, increasing the opportunity cost of holding the non-yielding precious metal.